Goldendale, WA-based self-storage operator Iron Guard Storage recently obtained $98.15 million from a CMBS loan backed by its 22-property portfolio.
The portfolio covers a total of 1.3 million square feet of space in seven states: Texas, Georgia, Alabama, Nevada, Washington, North Carolina and Virginia. The financing was arranged by Chicago based advisor The BSC Group. The 10-year non-recourse loan was underwritten at a debt yield of 7.5 percent.
“The timing of the transaction was ideal given the market had a strong appetite for this unique and well manage portfolio,” said Devin Huber, principal of BSC Group.
Huber said this was a much larger than average CMBS loan for a storage asset.
“Most self-storage CMBS loans are between $7 to $15 million,” Huber said.
Sweet spot for borrowers
Shawn Hill, principal of the The BSC Group, added that the current lending environment continues to be very favorable for borrowers. While interest rates are a bit higher than they were a year ago, Hill said that borrowers are able to structure deals with move favorable terms overall.
“The borrower was able to take advantage of the sweet spot in CMBS right now: full-term interest only financing,” Hill said.
Part of the reason for this is that there is a dearth of CMBS refinancing opportunities, as loan issuance bottomed out during the recession a decade ago. With fewer loans maturing and in need of refinance, lenders are looking for new deals to invest in.
“Because of that you got a lot of CMBS lenders getting very aggressive to try and win the business that is out there,” Huber said.
Capital for expansion
Iron Guard plans to use the funds for future self-storage acquisitions.
“Over the last five years, we’ve done three loans for this borrower. The financing climate today is such that he elected to refinance those three loans into one loan,” Hill said.
Huber said that prepaying the other three loans made it possible for the borrower to unlock untapped equity that it could use to expand its portfolio.
“The operator wanted to be in the position to take advantage of any value add opportunities, including any distress that may take place in the market as we enter the later stages of the development cycle,” Huber said.
